UPDATE 8-Oil down on weak Chinese, euro zone data

* China's March factory activity shrinks - HSBC Flash PMI

* France, German PMI falls sharply

* Iran watched, South Africa stops oil imports

* U.S. weekly jobless claims drop to 4-year low

By Gene Ramos

NEW YORK, March 22 Oil fell 1 percent in light
activity on Thursday, dragged down by manufacturing data from
China and the euro zone showing a drop in new orders that
spurred fresh concerns about global fuel demand.

Factory activity in China, one of the biggest engines of
global oil demand growth, shrank in March for a fifth straight
month, with the rate of contraction accelerating and new orders
sinking to a four-month low.

The report put oil markets, which have been balancing
concerns about global demand against the potential loss of
Iranian crude supplies, on a bearish trajectory in Asian
trading. Prices dropped further after data showed a sharp fall
in French and German factory activity that even the most
pessimistic economists, eyeing the euro zone's debt woes, failed
to predict.

"There's a bit of a China backlash at the moment, and we
should expect more turbulence as people assess whether China is
heading for a hard or a soft landing," said Filip Petersson,
commodity strategist at SEB in Stockholm.

"There's a far greater chance of a soft landing, but there
will be more doubts from time to time, and sentiment has turned
quite rapidly bearish today in Europe."

Oil briefly pared losses after U.S. government data showed
jobless benefit claims continued trending lower, falling last
week to a four-year low.

International benchmark Brent crude closed at $123.14
a barrel, dropping $1.06, marking the lowest settlement for
front-month Brent since March 6. U.S. May crude settled
down $1.92 at $105.35 a barrel. Trading volumes for both Brent
and U.S. crude were about 20 percent below the 30-day moving
average.

At the start of the month, Brent crude prices hit an
intraday high of $128.40, the highest since July 2008, while
U.S. crude hit $110.55, highest since last May, supported by
fears of supply disruption from Iran as the West tightens
sanctions to stop Tehran's disputed nuclear program.

Top oil exporter Saudi Arabia earlier this week again
pledged to increase output to meet any disruption in supplies as
part of an effort to bring down oil and fuel prices, which have
become a central issue in the U.S. presidential race.

Worries about rising U.S. gasoline prices have spurred
pledges from the White House to ease supply bottlenecks in the
world's biggest consumer, as well as considerations of tapping
emergency reserves.

While France and Germany ruled out a coordinated release by
members of the International Energy Agency such as the deal
reached last summer when the Libyan civil war cut supplies from
that OPEC member, the U.S. and Britain have discussed releasing
their reserves.

South Korea on Thursday said it would also support a
drawdown of its stockpiles to bring down prices.

In Cushing, Oklahoma, the delivery point for U.S. traded
crude oil futures, U.S. President Obama reiterated his pledge to
speed up the approval for the southern leg of the Keystone XL
pipeline that would ship crude from the Midwest, where supplies
are rising, to the Texas Gulf Coast refining hub.

The growing glut of stockpiles at Cushing have strengthened
Brent's premium against U.S. crude futures. The spread widened
to around $17.70, after closing at $16.93 on Wednesday.

HIGHER PRICES

Analysts polled by Reuters hiked their forecast for Brent
oil prices this year by $4 to $114.30 a barrel, citing the
concerns that supply losses could grow as a European Union ban
on Iranian crude takes effect on July 1 and Asian countries face
pressure from Washington to cut purchases from Iran.

South Africa has suspended almost all oil imports from Iran
and intends to abide by a U.S. request to significantly reduce
supplies coming from the Islamic Republic, a senior diplomat
said on Thursday.

South Korea, another major buyer, has cut imports of Iranian
crude in the first two months of 2012, adding to a growing group
of Iran's clients bowing to international pressure on Tehran.

In addition to the risk of an Iranian disruption, adverse
weather, technical glitches and unrest in Syria, Yemen and Sudan
has taken about 1.1 million barrels per day of oil production
offline, according to a Reuters report.

WASHINGTON, Dec 9 Aetna Inc's chief
executive denied on Friday that its withdrawal from some
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convince a federal judge to approve the deal.

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